Yum! Brands profit up 7% on strong China results

by Eric Schroeder
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LOUISVILLE, KY. — Net income for Yum! Brands, Inc. rose 7% in the third quarter behind strong operating results in China.

Income for the quarter ended Sept. 4 was $357 million, equal to 76c per share on the common stock, up from $334 million, or 71c per share, in the same period a year ago. Sales for the quarter were $2,862 million, up 3% from $2,778 million.

While Yum!’s China Division operating results were strong during the third quarter, climbing 24% to $267 million on a 20% gain in sales to $1,188 million, its U.S. operations struggled. Operating profit within the United States fell 2% to $168 million while sales declined 8% to $970 million.

“A key driver of our overall growth continues to be new unit development in China and Yum! Restaurants International,” said David C. Novak, chairman and chief executive officer. “We expect to open about 1,400 international new units this year. This new unit growth positions us well for another successful year in 2011.

“We continue to make progress at all three divisions and are especially pleased with the continued strong results from our China business. The combination of high return new unit development, same-store sales growth, and increasing margins drove operating profit growth of 23% in China for the quarter, excluding the impact of foreign currency translation. At Yum! Restaurants International, we increased system sales by 5% and grew operating profit 16%, prior to foreign currency translation benefit. Our U.S. business modestly improved same-store sales growth and margin but operating profit declined slightly. We expect sales momentum to continue in the fourth quarter.”

In addition to its third-quarter results, Yum! Brands raised its full-year 2010 earnings-per-share guidance to $2.48 per share from $2.43 per share previously.

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